#1 (permalink)  
Posts: 2,546

problem about annuities, stocks, bonds
a. Find the FV of an Annuity of $900, one at 12%, N 33, and another at 8%.
FV at 12% = 308,187. FV at 8% = 131,356. Total FV 439,543 b. Find the FV of 20,000, N 33, R 3%. That's 53,047 c. The PV (at age 65) of an Annuity of 53,047, N 20, R 8% is 520,823 d. Nope 
#2 (permalink)  
Posts: 2,592

problem about annuities, stocks, bonds
At age of 32, Sandra Gonzales has decided to invest $1800 per year for 33 years until she is 65, in her retirement plan. She has also decided to place onehalf of the funds in a stock index fund that roughly tracks the return on Standards and Poors. The other half of the funds will be placed in a mutual fund containing bonds.
a.Find the amount she will have at 65 assuming the stock fund averages 12% per year compounded annually and the bond fund averages 8% per year compounded annually. Using 33 periods find the value in the table corresponding to 12% and 8%. b.The amount found in part (a) seems like a lot of money. But Gonzales knows that inflation will increase her cost of living. She wants to see the effect of 3% annual inflation on her financial goals. Find the income she needs at age of 65 to have the same purchasing power as an income of $20,000 today. c.Gonzales wishes to fund her retirement for 20 years (from age 6585). Find the present value of the annual income found in part (b) assuming that the funds earn 8% per year compounded annually. d.Will her expected savings from part (a) fund her retirement at a purchasing power of $20,000 per year in today’s dollars? 
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